Todd Pruzan, HBR
Welcome to the HBR Video Quick Take. I’m Todd Pruzan, senior editor for analysis and particular tasks at Harvard Business Review. We’re right here at present with Etosha Thurman, who’s the chief advertising and options officer at SAP Intelligent Spend and Business Network. She’s right here with us to speak about threat administration and resilience for provide chain and procurement. Etosha, thanks a lot for being with us at present.
Etosha Thurman, SAP
Thank you for having me, Todd. I’m excited to be right here.
Todd Pruzan, HBR
Etosha, how can companies higher anticipate threat? And how can they measure resilience?
Etosha Thurman, SAP
After what we skilled as a world economic system in the previous three years, threat, not simply procurement, is prime of thoughts for a lot of C-suite executives, together with our CFOs and COOs. We’re all attempting to determine how we mitigate threat. How will we predict attainable threat and do our greatest to mitigate it?
In the world of procurement, after we take into consideration threat, there are just a few parts that we take into consideration. The first is how will we perceive the chance in the provision chain? Am I in danger for a provide outage, which many people skilled over the previous few years? Then there’s provider threat, whether or not that’s high quality of the provider or the potential reputational threat in utilizing the provider.
And then, after all, there’s price threat. So once you ask the query, how can companies higher anticipate threat, the primary reply I’ve is to observe it. Thinking about provide chain threat and in specific, provide threat, it’s with the ability to have visibility and transparency, collaboration along with your suppliers on your wants and their capability and the place you sit in that capability.
And there are answers on the market that may assist facilitate that sort of transparency and collaboration, together with people who we’ve at SAP. And then when you concentrate on suppliers, provider threat, I imply, that is in all probability one of many primary methods companies can handle threat in the case of the provision chain, by measuring, monitoring, and working with suppliers to grasp their dangers.
So whether or not that’s monitoring provider efficiency and having a baseline to work with, does this provider ship us high quality product or present high quality providers? Does it adjust to the time tips that we anticipate? So having a provider efficiency administration course of and answer is essential. And then, after all, additionally having threat monitoring, the place you may ask questions.
Conduct threat assessments of your suppliers. And on prime of that, have know-how that’s monitoring knowledge outdoors of what the provider has offered to offer you perception into general threat. As an instance, the SAP Ariba Risk Management Solution has monitoring that can hearken to media, hearken to exterior knowledge sources, and inform you if there’s a risk for elevated threat with a provider.
Let’s say the provider is in the trail of a tsunami that’s on its manner. The answer would warn you to threat elements which can be occurring with that provider. So there are various issues that corporations can do to proactively uncover, or monitor, threat. And then, after all, as soon as you’re conscious, then you may take proactive measures to handle the chance that’s been recognized.
It’s an issue throughout corporations of all sizes. But I’m pleased to say there are answers that may assist.
Todd Pruzan, HBR
That’s good to know. And sure, seems like loads of various factors. Etosha, how can procurement and provide chain leaders information the broader enterprise in threat mitigation?
Etosha Thurman, SAP
One of the primary issues that involves thoughts is by inserting threat consciousness into the procurement course of. So for instance, let’s say that you’ve an finish person who desires a brand new service. I would like a brand new firm to ship no matter service in order that I can fulfill our finish buyer’s wants.
One of the primary methods that you may deal with threat from a procurement standpoint is by sourcing and having info threat consciousness in the sourcing course of. So as you pull collectively your sourcing occasion in search of the businesses that may present the service that’s requested, you do a threat evaluation proper there as a part of the sourcing occasion to grasp which is the least dangerous of the alternatives on the market and make {that a} resolution criterion.
And then when you’ve chosen suppliers and you may have them inside your provider group and the precise finish customers in your small business need to do enterprise with these suppliers, it’s presenting the identical threat info to them. Not all suppliers are created equal. And value will not be all the time the one key resolution criterion.
So leveraging know-how the place an finish person goes and they need to purchase, let’s say, a laptop computer. And you may have three most popular suppliers that you simply contract with. And proper there in that purchasing resolution you may share with them the chance evaluation—the chance evaluation or rating of every of the suppliers to assist mitigate threat. If I would like this laptop computer in one week and I can see on the chance rating that this provider’s perhaps a yellow for us due to supply or high quality points, perhaps I don’t choose that provider.
And then, after all, the opposite manner is to make certain that the values and threat insurance policies that the corporate has are communicated and shared as a part of the provider administration strategy inside the firm. So after we’re bringing suppliers on, we’re doing a threat evaluation with them, asking them questions associated to our values and insurance policies, having them reply these.
And so it creates a dialogue round how we need to behave and set expectations, which additionally then mitigates threat inside the firm. So these are just some methods. Of course, I’m not right here to speak about enterprise-wide threat. But corporations even have these efforts in authorized and finance, however in specific in procurement.
Supplier administration, provider efficiency monitoring, and bringing threat consciousness into the sourcing and shopping for processes are all ways in which procurement may also help scale back or mitigate threat inside the firm.
Todd Pruzan, HBR
OK. So, Etosha, given all these concerns inside procurement, what are the highest organizational threat priorities that procurement groups are focusing on proper now?
Etosha Thurman, SAP
That’s an excellent query, Todd. If I take into consideration a number of the prime threat priorities, the primary one which involves thoughts is being positive that I’ve visibility into the place I’m spending. First of all, the place does our cash go? What corporations are we spending with?
The second is having an evaluation and understanding of the chance rating of these suppliers. According to my values, my firm’s insurance policies, how dangerous is doing enterprise with this provider? So if I take into consideration the highest threat priorities, it’s visibility. It’s understanding the chance profile of the suppliers as soon as I do know what corporations I’m spending with.
One that’s attention-grabbing and persevering with to develop in the minds of companies, and procurement in specific, is cybersecurity. Is there a threat from cyber assaults in our provide chain? We’ve heard of some high-profile circumstances over the previous couple of years the place there have been cyber assaults that impacted the provision chain. So that’s one which’s rising.
And then I believe one which’s ever current, that I used to be speaking about earlier, that really surrounds threat evaluation, is basically provider administration. It’s understanding the suppliers, sharing expectations, and having processes and know-how that permit for provider administration to be clear and collaborative.
So these are a number of the threat areas. And I believe there’s yet one more that I might add. And that’s predictive threat evaluation for the unknown, which is basically exhausting. And it’s driving again the method of leveraging issues like class administration to have the ability to set a baseline for the business for key classes and key supplies, and then with the ability to analyze threat throughout many elements, whether or not that’s monetary threat, capability threat, provider focus threat, geopolitical threat—all of them come into play and are on the minds of our clients and the market at giant at present.
Todd Pruzan, HBR
That’s an incredible vary of issues all people has to consider. Etosha, thanks a lot for an excellent dialog at present and for all of your insights.
Etosha Thurman, SAP
Thank you for having me, Todd. I’ve loved having this second with you.
Learn extra.
Etosha Thurman is chief advertising and options officer for SAP’s Intelligent Spend and Business Network.
